What The Economics Of 'Snowpiercer' Say About The Future Of Film

Last week, The Hollywood Reporter featured a special section on the future of film. Speaking to experts all around the industry one change came through loud and clear: the studios need to shorten the windows between release dates. Right now it takes about 90 days for a film to move from the theater to home video. That no longer makes sense and will have to change if the industry is going to survive.

An example of how Hollywood is gently trying to push that envelope is the movie Snowpiercer. If you've even heard of the film, it hasn't been from a barrage of ads on TV or giant billboards around your town. You've likely heard of it either from friends singing the movie's praises on social media or from a promo while searching your cable company's on-demand options.

But Snowpiercer will likely go down as one of 2014's most-important films. The film, from Korean director Joon-ho Bong, showed in just eight theaters for two weeks before making the leap to video on demand. In the past, this might have been an indication that the film was a flop that wasn't worth the high marketing costs of a wide theatrical release.

But in the case of Snowpiercer, VOD was the main part of the release strategy all along. From The Weinstein Company and Radius, the film is about a dystopic future where an experiment to end global warming has left the Earth covered in ice and killed all of the inhabitants except for a class-divided few traveling on a train that never stops moving. The movie stars Captain America himself, Chris Evans, as a passenger from the back of the train fomenting a revolt and Tilda Swinton as a representative of the train's government. It's a fantastically wacky, bloody film that earns a well-deserved 95 out of 100 on Rotten Tomatoes.

So why dump such a promising movie onto VOD? Because it made economic sense. When you see a production budget for a film, roughly $40 million in this case, you need to almost double that to account for prints and advertising -- the cost of rolling the film on in thousands of theaters.

By releasing the film on VOD, Radius and TWC avoided almost all of those costs. Advertising consisted of partnerships like Chris Evans welcoming San Diego hotel guests during Comic Con on the hotel VOD systems and suggesting they rent his new movie, Snowpiercer.

And while studios typically end up taking home 50% of a film's box office, the VOD split is closer to 75% meaning Radius and TWC earned a bigger percentage of every dollar spent without having to spend as much on advertising.

The film so far has earned $4.4 million at the domestic box office and roughly $6.5 million on VOD. Those aren't huge numbers. Drive, which Radius co-president Tom Quinn considers a fair comparison to Snowpiercer, earned $35 million at the domestic box office.

But Snowpiercer has earned another $87 million at the international box office bringing its total (between box office and VOD) to close to $100 million. The film also has the distinction of being the first movie thrown into the Oscar race. Voters have already received screeners.

So the question is: Is Snowpiercer a model for future movie releases? Yes and no.

"I think this kind of release pattern is the future of film distribution but not for every film," says Quinn. "I do think wide release theatrical works very effectively for certain tent pole movies."

But for films in the $20 million to $60 million budget range, an at-home release starts to make more and more sense. Without massive advertising costs, releasing a movie becomes much more affordable and producers are often able to cover large portions of their production budgets using tax credits and pre-selling foreign rights. Studios have more room to set prices at home so a film could debut at $10 for VOD (or more) and get cheaper the longer it is available. That variable pricing option doesn't exist at theaters.

The problem with this kind of model right now is theater owners. The movie house guys make their money selling popcorn which means they need butts in seats. And movies make most of their money in the first two weeks in theaters. If studios start to divert popular films to VOD, they'll find it hard to get other (crappier) films into theaters.

"We got push back from theater owners on this one," admits Quinn. "But I think that will change. The country is too big to access audiences in the first window economically and efficiently."

BTIG analyst Richard Greenfield thinks studios have to go even further than the Snowpiercer model. He thinks studios need to release bigger movies at home sooner. In an essay for The Hollywood Reporter he says:

By 2024, the concept of a multimonth window between a movie's theatrical and home entertainment release will no longer exist. ... By 2024, consumers will be able to pay for and access content whenever they want and wherever they want on a device of their choice.

He believes the catalysts will be companies like
Netflix producing their own high quality movies and increasing levels of piracy making it increasingly ridiculous for studios to not give viewers a legal home viewing option from the first day of release.

Will his vision of the future of Hollywood come true? Only time will tell but experiments like Snowpiercer show that consumers are ready for earlier options at home.

I live in Los Angeles and I'm lucky enough to write about the thing I love most: movies. I'm a graduate of Vassar College and Northwestern University and for 15 years I worked at Forbes mostly covering the entertainment industry. Although I've moved into the world of corpora...